Tax news

Benue Internal Revenue Service (BIRS), in collaboration with the operatives of the Operation Whirlstroke operating in SANKERA axis of Benue State have cleared all routes in the federal constituency of illegal check points. The operation which also had the leadership of the amalgamated traders union as part of the team, saw to the sanitation of all roads which hitherto was saturated with illegal tax points operated by hoodlums and extortionists. The team took their sanitation drive from Katsina Ala through Unum to Logo local government ensuring all checking and tax points in that area were taken off the roads to ensure free passage of traders and commodities without illegal levies. Meanwhile the Executive Chairman BIRS, Mr. Andrew Ayabam has resounded is resolve to ensure that the state is free of illegal tax points According to him the removal of illegal tax points and activities was the only way business and agriculture will strive in the state.   Source: Greenbox

The electricity Distribution Companies (DisCos) have dismissed the claim by an official of PriceWaterhouse Coopers (PwC) that they don’t pay taxes because they record losses. A statement by the Executive Director, Research and Advocacy at the Association of Nigerian Electricity Distributors (ANED), Barr. Sunday Oduntan, on Thursday said the DisCos were reacting to the comment by the Chief Economist of PriceWaterhouse Coopers (PwC), Dr. Andrew Nevin last Wednesday. Dr. Nevin, at a power sector roundtable organised by Mainstream Energy Solutions Limited in Kainji, Niger State on Tuesday said no DisCo in Nigeria has paid any tax to the Federal Government since 2013 when they were privatized, because they have been “on a loss-making track” since then. ANED which acknowledged Dr. Nevin’s effort to highlight the challenges of the sector however said his “claim was misleading, incorrect and not supported by the facts.” DisCos said they are responsible corporate citizens and take their tax obligations to the federal and state governments, as applicable, seriously. These taxes include the minimum Company Income Tax (CIT), Withholding Tax (WHT) and Value Added Tax (VAT). “As a result, the DisCos diligently pay all necessary taxes that apply to their operations. We will like to encourage all parties interested in the growth and success of the Nigerian Electricity Supply Industry (NESI) to constantly, diligently verify their information, to avoid creating more challenges than that which already exists in the sector,” they held.   Source: Daily trust

The Association of Certified Fraud Examiners (ACFE), Lagos State chapter, has urged federal government to be strategic about imposing new and increasing existing tax rates. The association bared its mind on the tax environment during a training session it organised for ACFE members and non members in Lagos recently. Speaking during the training, President of the Association, Prof. Godwin Oyedokun, stated that a complex tax regime would scare away investors and further lure them to seek means of evading tax payment. He added that rather than increasing taxes, government should widen the tax net such that would accommodate more taxpayers. Making reference to the proposed 7.5 Value Added Tax (VAT), increment, he noted that in effect, quite a lot would resort to making open market purchases and avoid structured and formal markets like Shoprite, which on the other hand, would rub off negatively on the buttom line of formal retail outlets. He said that VAT increment would also affect consumption level, disposable income and cost of doing business. Oyedokun also cautioned government to thread softly in introducing punitive measures to aid tax compliance. According to him,”This in most cases is always counter productive as it gives room for undue negotiations and compromises from both tax payer and tax authority respectively. While I am not completely against penalty, I would say that the authority should use it selectively and also apply palliative measures before adapting it.” The 2nd Vice President of the association, Dr. Titilayo Fowokan, added that government could resort to moral persuasion and tax education instead of enforcing penalties. She said: “There should be tax justice such that tax payers can see the dividends of their efforts and be willing to pay more without being forced or pushed. Government should also strive to create an enabling environment that would make companies to generate employment. Once jobs are paid, income will be generated and more taxes will be paid”. Fowokan also explained the essence of the training to update members on latest fraud technology and trends in tax environment to enable them know how to deal with it.   Source: This day

Power distribution companies on Thursday said it was incorrect for an executive of PriceWaterhouseCoopers to claim that no Disco had paid any tax since the power sector was privatised since 2013. Speaking under the aegis of the Association of Nigerian Electricity Distributors, the umbrella body of Discos, the power firms stated that they had been paying taxes to both the federal and state governments. The Executive Director, Research and Advocacy, ANED, Sunday Oduntan, stated that the Discos were paying different taxes even though they were challenged. Oduntan stated that as responsible corporate citizens, all members of ANED took their tax obligations to the federal and state governments, as applicable, seriously. He said, “As a result, the Discos diligently pay all necessary taxes that apply to their operations. “These taxes include the minimum Company Income Tax, Withholding Tax and Value Added Tax.” He said the Discos would like to encourage all parties interested in the growth and success of the Nigerian Electricity Supply Industry to constantly and diligently verify their information.   Source: Punch

Timi Frank, political activist and former Deputy Publicity Secretary of the All Progressives Congress (APC), has dared the Federal Island Revenue Service (FIRS) to go to court, telling it to bury its face in shame over alleged corruption being perpetrated there. The activist had on Monday linked the agency with a N90 billion election fund it allegedly advanced to the ruling APC for the prosecution of the 2019 general elections. He also claimed that the ongoing attack against Vice President Yemi Osinbajo by unnamed Presidency cabal was due to his failure to give proper account on how the alleged sum was disbursed. But the FIRS, in a statement, denied any such transaction as it was against the law, and demanded an unreserved apology from Frank within 24 hours or risk legal action. But Frank, in his reaction, rubbished the threat as mere intimidation and vowed to meet the Service in court. He described the agency’s ranting as a puerile attempt to sweep the main issues in his public statement under the carpet. He said that the FIRS thinks it can continue to deceive Nigerians by claiming unfounded budgetary fidelity. The statement reads: “I read the statement by the Federal Inland Revenue Service and I am rather disappointed at their intellectual laziness. “Who is the FIRS trying to fool by claiming that its annual subvention is not up to a N100 billion? That is an unintelligent attempt to fool the public. “The FIRS, like the Nigerian National Petroleum Corporation, Central Bank of Nigeria and the Securities and Exchange Commission, are revenue-generating agencies of the Federal Government that do not depend on budgetary subventions. “These agencies are able to appropriate huge funds from the monies they generate for their use.” He urged the agency to come clean and tell Nigerians the reason for the discrepancies, which exist in their records of tax collection. “For example, on January 7, 2019, the Federal Inland Revenue Service announced that it had broken Nigeria’s all-time revenue generation record by generating N5.3 trillion in 2018.”   Source: Independent

Amongst other factors, the global dip in oil prices and the resulting economic recession in Nigeria resulted in an increased focus on revenue generation through taxation in Nigeria. Following the mandate by the Federal Government, the Federal Inland Revenue Service (FIRS) intensified its drive for tax collection and has so far reported giant strides in its collection efforts. However, the tax-to-Gross Domestic Product (GDP) ratio has continued to hover around an abysmal 6% despite the reported tax revenue increase by the FIRS. While the tax-to-GDP ratio is nothing more than the portion of a country’s output (i.e. domestic product) that is attributable to tax receipts, it is one of the most widely used tool for measuring the efficiency of a country’s tax system. Recent data from the National Bureau of Statistics indicates that Nigeria’s GDP stood at ₦31.79 trillion in the first quarter of 2019 (Q2 2019) while the total government collection in taxes was barely ₦1.5 trillion in that quarter. In this article, we have evaluated Nigeria’s tax-to-GDP ratio vis-à-vis the metrics for determining the current rate. We have also highlighted the underlying factors for the going rate and proffered recommendations on how both the tax revenue and the ratio can be improved. The Nigerian Tax to GDP ratio: When tax revenue grows at a slower rate than the GDP, the tax-to-GDP ratio drops; when tax revenue grows faster than GDP, the ratio increases. In most instances, the ratio of tax-to-GDP stays relatively consistent because tax collection is closely connected with the rate of economic activity. Thus, the general expectation is that GDP should grow parallel to tax revenue. However, low tax-to-GDP ratio is not an uncommon phenomenon with developing economies including Nigeria. Prior to the economic recession in Nigeria in 2016, the Nigerian GDP figures were rebased and the new figures were greatly celebrated as the news that the Nigerian GDP had grown to be the largest in Africa was widely published. Notwithstanding the reported growth, the tax-to-GDP ratio has remained at 6% which is even relatively lower when compared to other developing economies. In certain studies conducted on the Indian economy, also a developing economy, certain factors were identified as contributing to low tax-to-GDP ratio. These factors include unorganized informal sector, narrow tax base, tax exemption and subsidy policies as well as loopholes in tax laws. We have discussed some of these factors as they apply to Nigeria below: Narrow Tax Base:  Undoubtedly, a small tax base places huge burdens on honest and compliant taxpayers. According to the International Monetary Fund (IMF), out of the Nigerian labour force of 77 million persons, only 10 million persons are registered for tax purposes. This situation has adversely affected government’s revenue generation through taxes. On a broader note, in Q2 2018, the oil sector was recorded to have contributed 8.55% to the total real GDP in Nigeria while the non-oil sector was recorded to have contributed 91.45% to GDP. In contrast, total government revenue in taxes from the oil sector (Petroleum Profits Tax) totaled about ₦524 billion (39.26% of total tax revenue) while non-oil taxes totaled about ₦810 billion (60.74%).   Source: Mondaq

Babatunde Fowler, chairman of the Federal Inland Revenue Service (FIRS), says taxation is the country’s lifeline for economic development. Fowler made this known on Tuesday night in Abuja at the investiture of Kudirat Abdul-Hamid as the third national chairperson of Society of Women in Taxation (SWIT). Fowler was represented by Abiodun Aina, an official of the FIRS. He said aids, grants and loans were not reliable revenue sources to ensure the development of any economy. Charging SWIT under Abdul-Hamid’s leadership to continue to educate Nigerians on why they should pay tax for economic and national development, the FIRS while the service will continue to work to reduce the burden of taxation. Although Fowler noted that Nigerians were not convinced that their taxes were being judiciously used, he said the federal government has been more prudent in utilization of generated revenue from taxation. According to Fowler, revenue generated from taxation is currently being utilised by the government to improve the country’s infrastructure, electricity as well as create employment. In her remarks, Abdul-Hamid assured that she would not let Nigerians and members of SWIT down. “We shall ensure global best practices, value creation and addition; we hope to bring more women on board, including those operating in isolation,” she said. “We will remain resolute in not just talking taxation, but working to ensure that Nigerians pay their taxes.” NAN reports that Abdul-Hamid is a fellow of the Institute of Chartered Accountants of Nigeria (ICAN) and Chartered Institute of Taxation (CIT) and a member of Nigerian Institute of Management, is presently the auditor-general for federal capital territory (FCT) area councils.   Source: The Cable

Residents of Cross River State, particularly low income earners, have been warned not to evade paying their taxes. The Speaker of the state House of Assembly, Eteng Williams, gave the warning in Calabar during a tax enlightenment town hall meeting organised by the Cross River State Internal Revenue Service as part of its sensitisation and enlightenment of tax payers on voluntary tax compliance.  Williams said for any low income earner to be exempted from the tax net, the executive arm of government would forward a list of those who qualified for exemption to the Assembly and then pay for them as the law did not allow tax exemption. “What the law actually says is that at the beginning of a tax year, which is before the appropriation is passed, we have to write to His Excellency to give us (the Assembly) the list of those to be exempted. “Tax is compulsory, which means the government must pay for those people. If the government does not pay, then they have not been exempted. You cannot exempt yourself from tax because it is against the constitution of the Federal Republic of Nigeria,” he said. “If the Cross River State Government is willing to pay for them, then they will be exempted, particularly the low income earners. When government categorises those who are low income earners and then gives us the list of these people, then they will be exempted and we will collect the money from government. “Everybody must pay their taxes. If you are being exempted, you have to tell the government to pay for you because when someone asks you to present your tax clearance certificate and you don’t, then it’s against the constitution. Any law that is in conflict with the constitution is null and void.”   Source: Punch